Despite critical report, Pacific Grove still open to desal partnership with Agha

Correction: The continuation of consideration of an agreement between the city of Pacific Grove and water-project developer Nader Agha wasn't the subject of a hearing or council vote last week as reported in a Saturday story in The Herald. The item was pulled off the council's Wednesday agenda by Mayor Carmelita Garcia and delayed until July 18.

The Pacific Grove City Council remains open to the proposal by developer Nader Agha to team up on a desalination plant.

Despite a highly critical report by City Manager Thomas Frutchey that concluded the risks outweigh the potential benefits, the council voted 5-2 this week to keep the proposed preliminary partnership alive — on yet-unsigned paper.

"The matter has been continued to July 18," Mayor Carmelita Garcia said Friday, still steamed about Frutchey's opposition to the proposed partnership the council put in motion in mid-April.

"It was pretty outrageous actually," she said.

An attorney for Agha also took issue with the negative recommendation by Frutchey.

"Unfortunately each of (his) arguments is flawed," said attorney Paul Hart in a 10-page memo countering Frutchey's seven-page analysis.

Agha is proposing to work with the city to develop a $129 million desalination plant on industrial property he owns in Moss Landing. He says the project — dubbed the "People's Desal Project" — would be a less costly alternative to California American Water's proposed Peninsula water project.

But after two months, the parties haven't yet signed preliminary documents to "define" the relationship between the city and Agha.

On Wednesday, the council expected language ironing out the city's indemnification — protection against losses — in the deal. But Garcia said the hearing "turned into something quite different."

The preliminary agreement, called a "formation agreement," would put the city in a position to allow "us to do the exploration and research we need to. And it is not costing us a penny," Garcia said.

Hart said in his memo that Agha has committed to spend up to $600,000 of his money to cover "all associated costs," and the city would be under no obligation to go any further.

Without the city's partnership, he said, the state Public Utilities Commission and other regulatory agencies would not be forced to consider Agha's project "as a viable and less-expensive alternative," Hart said.

For his part, Frutchey outlined several reasons for concluding the city's involvement would have a "low likelihood of positive benefit."

He said the PUC is unlikely to approve any of the three water projects as currently conceived. Moreover, he said, Agha and the city have "markedly different goals."

The partnership would present the city with significant financial and legal risks, and "the project is way beyond the city's capabilities," Frutchey said.

Hart countered that many of Frutchey's objections "attempt to re-hash arguments that have already been considered and rejected by the council."

He contends the council would be helping Pacific Grove residents by pursuing publicly controlled water at a potentially lower cost than Cal Am. "The city can take this next step without risk ... and without an out-of-pocket expense," he said.